Suzuki to invest Rs2,600 crore in Gujarat plant

November 29, 2016 — INDOLINK Consulting (es)

Source: LiveMint.com, Nov 29, 2016

New Delhi: Japanese automaker Suzuki Motor Corp. plans to invest Rs2,600 crore through its unit Suzuki Motor Gujarat (SMG), to build its second assembly plant in India and an engine and transmission unit.

The units, in Mehsana in Gujarat, will become operational in 2019 and serve Indian and export markets.

Suzuki Motor Corp. has entered into a contract manufacturing agreement with its local unit Maruti Suzuki India Ltd, under which it will produce and sell vehicles to the latter.

Suzuki Motor Gujarat aims to start production with initial capacity of 250,000 units a year in February 2017 and reach a maximum capacity of 1.5 million by 2030.

The decision to increase investment in the Gujarat unit was taken at a Suzuki Motor board meeting on 18 November.

With this, Suzuki’s total investments in Suzuki Motor Gujarat will increase to Rs5,800 crore.

“This capital increase is to fund capital expenditure for facilities of SMG’s second assembly plant and engine/transmission plant which Suzuki plans to start… in 2019 to prepare for the future growth of Indian automobile market and for the expansion of exports from India,” Suzuki Motor Corp. said in a notification to Tokyo Stock Exchange on 18 November.

The Japanese company has a 56% stake in Maruti Suzuki, India’s largest carmaker. India, the world’s second-most populous nation, accounts for about 45% of Suzuki Motor Corp.’s global sales by volume. Economic growth in India is projected to surpass China’s in 2016 and 2017.Suzuki Motor Corp.’s move will provide much-needed support for Maruti Suzuki, which has been unable to meet demand for its vehicles such as the Baleno hatchback and the Vitara Brezza compact sports utility vehicle due to capacity constraints at its Haryana facilities, where it produces 1.5 million units a year.

Trial runs at Suzuki Motor Gujarat’s first assembly plant have already started. Suzuki has appointed Naoki Aizawa as the managing director at SMG. Abhay Joshi has been hired as head of human resources.

In its annual report for the year ended 31 March, Suzuki said it was expecting to achieve its highest consolidated net sales of 3.7 trillion yen (around Rs2.25 trillion) in fiscal year 2019.